Made in China, Controlled by America
A new dynamic forms on the back of TikTok
After almost a decade of back-and-forth between the US and China over TikTok, and a brief moment in January when the app went dark, an agreement has been inked, deciding the future of the platform in America. A new joint venture is being created, majority-owned by American companies, that will control TikTok for its more than 170 million US users.
Data collected in the US will be stored in America, and content on the platform, shown to American users, will be regulated by a US-based team.
However, the key transaction involves TikTok’s infamous algorithm, which will be retrained in the US with new data, an indirect way of saying America will attempt to “recreate” TikTok’s algorithm to remove any censorship or Chinese influence over the content and recommendations.
New Dynamic
Except, here is the grey area. ByteDance has not allowed TikTok to sell the algorithm. Instead, the algorithm is effectively being licensed to US companies.
This is far more than just a new JV between the US and China. This is a new model that is likely to accelerate in the coming years as the West puts Chinese innovations in the crosshairs.
That is, “Made in China, Controlled by America (or the West).”
Before going deeper into this new paradigm, a point of caution. The new TikTok deal does not mean US-China relations are improving. Or that the deal inked in South Korea in October, on the sidelines of APEC, is having a lasting impact. On the most critical fronts, particularly rare earth exports, chip supplies, fentanyl, control of ports, and the US seeking to attract China’s economic partners, more splits are forming between Washington and Beijing.
The real fight was never over TikTok or 5G. So, solving these headaches changes little in the ongoing US-China economic war.
However, the new deal does point to the new reality.
Put simply, the West is preparing to take control of China’s footprint across the globe. First, it is TikTok. Next, could it be EVs and batteries? This, of course, puts China in a perplexing position as it builds in the West to circumvent Western de-risking. Yet, the push to build in the West is running into Western governments literally taking control of what China is building.
Short-Term vs. Long-Term
Not only does this raise the probability of fresh fighting between China and the West, but it also represents a new model in the global economy.
Before, it was “Made in America, Built in China, Deployed Globally.”
But today, as China’s innovative capacity rises, the West will be deploying what was made in China, not in Western markets. From a short-term lens, this may seem like a “win.” For instance, retraining TikTok’s algorithm means ejecting Chinese bias and giving American users a “clean algorithm.”
However, from a long-term lens, Western society will be revolving around a new generation of high-tech products and services made in China, not locally. This is a massive shift from the past. And, the West does not even fully control what it is “claiming” from China. This is “geopolitical leasing*." At any moment, China can end the lease, pulling TikTok from the US market and weakening America.
(“Geopolitical Leasing” is a concept/expression of Abishur Prakash/The Geopolitical Business, Inc)
Battle vs. War
Are the US and its allies aware of this new innovation gap?
It is not all bad news for the US. Even China is in a tough spot. Not just because on paper it is losing control, but also because the door has swung open to a new era of bans against Chinese technology (after 5G). The US will not be the last Western firm to go after TikTok. Next up is likely to be the UK, EU, Japan, and Australia. Even India could demand a localized-version of TikTok. Is China prepared for this?
Perhaps, policymakers in Beijing have decided to lose the battle and focus on the war. Give away TikTok but succeed in other areas.
This creates a clear divergence between Washington and Beijing.
The US believes it has won by taking control of TikTok from China. But for China, it is a very different calculation. The battle with America has only just commenced. And if giving away TikTok keeps America’s critical eyes off Beijing for some time, perhaps it is worth it. In the game of geopolitics, strategy is everything. The TikTok deal may not be a success, but a geopolitical play.
Is America seeing the bigger picture?
ABISHUR PRAKASH AKA. MR. GEOPOLITICS
Mr. Geopolitics is the property of Abishur Prakash/The Geopolitical Business, Inc., and is protected under Canadian Copyright Law. This includes, but is not limited to: ideas, perspectives, expressions, concepts, etc. Any use of the insights, including sharing or interpretation, partly or wholly, requires explicit written permission.
Brilliant framing on the geopolitical leasing concept. The paradox here is pretty stark when you think about it. America celebrates taking contrl of TikTok, but the underlying architecture remains fundamentally Chinese. I've seen this play out in the EV sector too where Western companies are basically repackaging innovations they can't match domestically. Winning the battle while ceding the inovation war seems like an expensive way to stay relevant.